If you do not link product allocation to supply data properly, the two can fall out of sync quickly. This requires more manual intervention by planners and leads to problems such as shipping to the wrong customers and artificial shortages. Learn how to avoid this pitfall.

Key Concept

When they have to make decisions about how to distribute and sell products that are in short supply, businesses restrict the supply based on criteria such as distribution channels, geographical regions, customer groups, or priorities by individual customer. How they assign supply according to the defined criteria falls into the realm of product allocation planning. In Advanced Planning and Optimization (APO), this is done via the Allocation Planning tool in Demand Planning (DP). Since how the product is allocated varies based on different business scenarios, the characteristics you configure for the planning object (structure) also vary greatly. DP supports the forecasting and demand planning process, in that it allows you to select the planning characteristics and information important for the planning process.

When a product is in short supply, you usually want
to make sure each customer gets a proportionate share
and that the entire inventory doesn’t go to
one customer who places a large order first. This
happens often when a new product becomes very popular.
In such a case, demand shoots extremely high very
quickly and you want to distribute the product as
widely as possible. In another scenario, a product
could be in short supply because of material or capacity
constraints. Product Allocation Planning addresses
these situations by restricting the first-in first-out
(FIFO) method of order confirmation in R/3 Sales
and Distribution (SD). The first single customer
order can be confirmed, leaving the other customers’ orders
with no available quantity. Allocation Planning addresses
the problem by restricting the allocation to specific
customers or other criteria such as customer groups
or regions. The restriction criteria are flexible
to your company’s needs.

When integrated with
R/3 or a mySAP ERP environment (from Advanced Planning
and Optimization [APO] 3.0 onwards), the Allocation
Planning function in Demand Planning (DP) acts
directly when sales orders are created or changed,
and when the GATP function is performed for the allocated
products. The confirmations in the sales orders
are based on what the allocations are for the criteria
that you preset in Allocation Planning. In this
article, I’ll show you how the Allocation Planning tool
is integrated with the GATP function.